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Laffan Petrochemicals could be a safe bet in difficult times

Laffan Petrochemicals LPL (an ISO 9001-2000 Company) was set up in 1994 to manufacture ethylene oxide (EO )derivatives such as Ethoxylates, Propoxylates, Glycol Ethers, Acetates, Ethanol Amine, and Brake fluids is located in Ankleshwar, Gujarat. It has technical collaboration with AKZO Nobel.

The plant set up under technical assistance of Reliance Industries is in proximity to EO supply from Reliance, Hazira. This ensures uninterrupted supply of its basic feedstock which cannot be imported due to its hazardous nature. LPL maintains its own fleet of specially fabricated EO tankers, and is currently the largest buyer of Ethylene Oxide in the Country.

The unit has commissioned India’s largest loop reactor with state – of the – art – controlled system from ROSE MOUNT for consistent quality, This multipurpose unit is geared to produce Polyethylene Glycols and EO condensates of Alkyl Phenols, Fatty Alcohols, Fatty Acids and Natural Oils. Some of its products are :

The unit has expanded its Glycol Ethers and Acetates capacity from 15,000 to 30,000 TPA. LPL is the only Butyl Glycol and Methyl Glycol manufacturer in India along with their respective acetates. LPL also produces ‘THEIC’-(based on BASF process know how),-a unique Surfactant for the wire enameling industry.

On the Financial front, so far the margins were not consistent, as the Raw material prices fluctuate and the increased product prices can not be passed on to the consumer, because of the long term rate contracts. However with increased capacity and rise in domestic demand, margins are expected to stabilise and rise significantly.

LPL’s equity is Rs. 8 crores and at CMP of Rs. 20 ,market capitalisation is only Rs. 16 crores. With top line of Rs. 160 crores, and expected EBIDTA of Rs. 8 crores for FY08 and Rs. 16 crores for FY 09, share is highly underpriced and is a screaming BUY .Expect an EPS of Rs.4.5 for FY08 and Rs.9 for FY 09 .The share is available at P/E of less than 5.

BUY at CMP of Rs. 20 with 2 years HOLD is recommended to see a price of RS. 100

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